In 1993, the UK prison population was 44,000. Today it is over 83,000. This trend is set to continue: the government has recently announced an extra £3.8bn to create 20,000 more prison places.

In the UK it is estimated that each new prison place costs £119,000 and that the annual average cost for each prisoner exceeds £40,000. Such huge public expenditure should not be spent without question. But where value for money models are widely applied in other state services like healthcare, they have rarely been used to test the value of the criminal justice sector.

It might be true that incarceration reduces re-offending, but the cost of the prison system still has to justify that reduction. Is the cost of cutting offending through prisons too high? Could alternatives provide better value for money?

These are the questions I and my colleagues from the Matrix Knowledge Group have sought to address in our latest research. Using data from the US and the UK from 1996, we measured the net benefit of alternatives to prison. The result? Alternatives to prison seem to deliver a better return on public money.

Residential drug treatment programmes, for example, offer a £200,000 net benefit over prison over the lifetime of an offender. This is because drug treatment programmes are cheaper to run than incarceration systems and because they deliver lower re-offending rates. Similarly, using surveillance instead of cells saves £125,000 per convict.

This research could be used to argue that we simply have to reduce the cost of prison per prisoner to make it deliver value for money. If we cut corners and McDonald's-ise our cells, wouldn't prisons then deliver value for money? Our research suggests not. Once you crunch the numbers, investing more in prisons per head actually delivers increased savings in the long run. Because of associated reductions in re-offending rates, prisons which include educational and vocational programmes save society £50,000 for each inmate whilst prison with drug treatment saves £125,000.

Other work supports our findings, with some key studies indicating that prison as we know it is completely unjustifiable on economic grounds. Cynthia McDougall and colleagues point out that for every $1 spent on prison, only $0.24 to $0.36 is saved on avoiding offending. This contrasts to spending on probation, which delivers $1.70 in benefits for every dollar spent.

The debate for and against prisons has historically focused on the moral, political and social arguments for sentencing. But public money is scarce; we need to make sure that the benefits of our prisons outweigh their costs. Whatever penal policy we decide to pursue, ignoring the economic dimension to this argument is something we can no longer afford to do.